Weak Chinese market sees iPhone sales dive as Apple revenue plummets for first time in 13 years

Apple iPhone sales, which account for nearly two third of the Silicon Valley giant's revenue, has fallen for the first time ever, the company declared in its latest earnings, reflecting the first quarter of 2016. The slump has forced the iPhone maker to face its grim revenue figures, which finally fell after an impressive 13-year growth.

While overall sales were down 13% from $58bn (£40bn) to $50.6bn, profit was down a whopping 22% from $13.6bn to $10.5bn. iPhone revenue alone was down 16% as the company managed to sell just over 51.2 million units of the device in the first quarter of 2016, a noticeable decline from 61.2 million units of the device sold in the first quarter of 2015. Apple made 18% less revenue from the sale of iPhone devices this year than what it did at this time in 2015.

The downtrend has been mostly attributed to the weak Chinese market, Apple's largest iPhone consumer base outside the US. Additionally, a strong dollar — up almost 20% in the last two years against major currencies — effectively making US exports more expensive in foreign markets has discouraged people from shelling out big bucks for the iPhone. Sinking iPad sales and a flat Mac demand has only added to its woes.

Apple CEO Tim Cook, who took charge from Steve Jobs in 2011, assured investors and consumers that this was just a pause and not a fundamental change in the company's business as the smartphone market was not growing, reinforcing wider concerns of saturation. Remember that Gartner estimates put worldwide smartphone sales at their slowest growth since 2008 at the end of 2015.

"We had a very busy and challenging quarter. But despite the pause in our growth, the results represent excellent execution by our team in the face of strong macroeconomic headwinds. The future of Apple is very bright and some amazing innovations are in the pipeline," he said in the earnings call.

Declining sales

In the company's defence, Apple executives had predicted that iPhone sales would decline this quarter but the real challenge is assuring investors where the company strategy is headed. The figures below show how the three major products of the company have taken a hit compared to 2015.

Product

First quarter 2016

First quarter 2015

Percentage decline

iPhone

51.2 million

61.2 million

16

iPad

10.2 million

12.6 million

19

Mac

4 million

4.6 million

12

China concerns for Apple

Sales have fallen rapidly down 26% year-on-year in China region, which includes Taiwan and Hong Kong. For China alone sales fell 11% on account of the struggling economy and Yuan woes.

The company, however, seemed positive about the region with Cook saying much of the Greater China drop was due to Hong Kong, where strength in the local dollar, which is pegged to the US currency, deterred tourist shopping. But the company may still face some slump from its iBooks Stores and iTunes Movie service, which were shut down recently in China on which Apple did not comment.

Bright side

Among some rather worrisome numbers some bright spots emerged. For one, Apple's latest quarter revenue for its services business, which includes iCloud, the iTunes App Store and Apple Music, was up 20% from $5bn to $6bn. Services is currently Apple's second-largest business unit, trailing only to iPhone in sales.

Additionally, some good news came from emerging market India, where iPhone sales were up 56%, and Cook said the rate of customers switching from Android was the highest ever. The company has plans to open its first official store in the country soon.

Apple will now look forward to the release of the iPhone 7, rumoured to be launched around September 2016, along with the release of Apple Watch 2. Besides, the company is also hoping that the recently released iPhone SE will garner decent sales.